3 Things to Know Before Refinancing PT Loans


Like the grim reaper silently following you in your post-grad years, PT student loans can haunt you for decades. With a constantly shifting economy and cost-of-living on the rise, refinancing your loans can ease the burden of student debt and allow you to focus more on your emerging career and less on those nagging bills. However, there are a variety of things that need to be considered before attempting to refinance.

Tips For Refinancing

Make Sure You’re Qualified

One of the most common mistakes many recent grads will make is not knowing whether or not they even qualify for refinancing. For someone to refinance their loans, three things must happen:

  • Your financial situation has to improve. When you originally got the loan, the financial institution was aware that you most likely did not have a steady income, but were under the impression that after school, your financial situation would improve. The amount you are charged is directly correlated to the perceived risk. The higher the risk, the greater the amount charged (the interest rate). The lower the risk, the lower the amount charged. If you are perceived as “lower risk,” you will be able to refinance into a lower rate.
  • You’re perceived as a greater risk than before. Let’s put it this way, when you initially got your loan, most financial institutions gave you the benefit of the doubt. They knew you might not be making a lot of the money initially, but in time you would become financially stable enough to pay back the loans. However, with rising tuition and a tougher job market, many looking at refinancing can be seen as even greater risks than before. If this is the case, your interest rate could actually increase, making this option pointless.
  • Market interest rates must stay the same. Since market interest rates can differ from year to year based on the overall economy, you may be seen as a higher risk depending on the current economy.

Know Your Financial Timeline

Many looking to refinance will often make the mistake of shortening their loans without realizing that the payments could drastically increase. While there’s nothing wrong with wanting to get the loan monkey off your back, it’s important to aware of your current financial situation. Many lenders will urge you to refinance into a shorter loan period because it will save more money. However, depending on your monthly income, you might not be able to afford the increased payments, putting you right back in a precarious situation.

Make sure to budget out your money so you can comfortably pay off your loans while still maintaining a healthy financial situation.

Refinancing Isn’t “Make or Break”

Many are deterred from refinancing simply because it can be such a huge financial decision. However, it doesn’t have to be the looming “make or break” decision you assume it is. Many people who have multiple loans will choose to only refinance a few of them. This way, you still save money, but still keep some of the flexibility of traditional loan payments.

Either way, it’s important to consider all factors when making this decision. It’s not the end of the world if you make the wrong decision, but doing your homework can limit the possibility of choosing the wrong option.

Author: Allied Travel Careers

Share This Post On

Submit a Comment

Your email address will not be published. Required fields are marked *